Guidelines on how a settlement entry works between a customer and supplier if they are the same person.
Answer:
To settle between a customer and supplier if they are the same person, you can use manual accounting entries.
Here’s a practical example to illustrate how settlement entries work:
First: If the supplier account is greater than the customer account
1. Identify the accounts and mutual debts:
- Supplier: You have payables on the supplier account of 5,000 SAR.
- Customer: At the same time, the customer owes you 3,000 SAR.
2. Calculate the amount to be paid: Since the customer is also a supplier to you, you can settle the amounts between the customer and supplier accounts.
- The remaining amount to be paid after settlement is:
5,000 SAR (supplier account) – 3,000 SAR (customer account) = 2,000 SAR.
3. Record the accounting entry:
- When performing the settlement, you will make a settlement entry showing the payment of part of the amounts between the accounts.
The entry will be as follows: - Debit: Customer account by 3,000 SAR.
- Credit: Supplier account by 3,000 SAR.
4. Final result:
- After settlement, the customer and supplier accounts will be updated as follows:
- Supplier account will owe 2,000 SAR (after deducting 3,000 SAR from the amount you owe).
- Customer account becomes zero (because the amount that was to be paid was deducted).
5. Review the accounts and reports:
- Ensure that the accounts and payments have been settled correctly, and that the reports accurately reflect these settlements.
- For example, in the account statement report, the supplier should appear with only 2,000 SAR, and the customer should not appear with any amount.
Second: If the customer account is greater than the supplier account
1. Identify the accounts and mutual debts:
- Supplier: You have payables on the supplier account of 3,000 SAR.
- Customer: At the same time, the customer owes you 5,000 SAR.
2. Calculate the amount to be paid: Since the customer is also a supplier to you, you can settle the amounts between the customer and supplier accounts.
- The remaining amount that should be paid to you by the customer after settlement is:
5,000 SAR (customer account) – 3,000 SAR (supplier account) = 2,000 SAR.
3. Record the accounting entry:
- When performing the settlement, you will make a settlement entry showing the payment of the amounts between the accounts.
The entry will be as follows: - Debit: Supplier account by 3,000 SAR.
- Credit: Customer account by 3,000 SAR.
4. Final result:
- After settlement, the customer and supplier accounts will be updated as follows:
- Supplier account becomes zero (because the amount owed was deducted).
- Customer account will still owe 2,000 SAR (the remaining amount to be paid to you).
5. Review the accounts and reports:
- Ensure that the accounts and payments have been settled correctly, and that the reports accurately reflect these settlements.
- In the account statement report, the customer account should appear with 2,000 SAR, while the supplier account should not appear with any amount (because it has been settled).
